MNI POLICY: Canada Sets no Fiscal Anchor in Covid Fight

Canadian Prime Minister Justin Trudeau said he will use "whatever fiscal firepower is needed" to tackle Covid-19, and take advantage of low borrowing costs to fund other projects such as expanded daycare, fighting climate change and helping 1 million people find jobs again.

The "Throne Speech" lacked any fiscal anchor as sought by some investors to plot a way back from a deficit that's already at record CAD343 billion or 15% of GDP, even when the virus is contained. There was also no date for a full budget that must be delivered every year, just a pledge for another fiscal update like the one presented in July.

"This is not the time for austerity," according to a speech read for Trudeau's Liberal government by the Governor General in Ottawa. "The first (priority) is to help Canadians in the short term, to do whatever it takes, using whatever fiscal firepower is needed to support people and businesses during the pandemic."

"With interest rates so low, central banks can only do so much to help. There is a global consensus that governments must do more. Government can do so while also locking in the low cost of borrowing for decades to come. This Government will preserve Canada's fiscal advantage and continue to be guided by values of sustainability and prudence."

Even that promise was undercut by plans to spend on priorities beyond the immediate crisis, such as public funding of prescription drug costs, child care, and climate change. The government will also raise taxes to fight inequality and on major internet firms, and press ahead with a carbon tax to meet a 2030 target even sooner and set a goal for 2050.

The left-leaning NDP and Bloc Quebecois are likely to support more spending and ensure a motion on the speech passes to avoid an early election, especially with the Bloc and Conservative leader in Covid isolation. The push for even more spending may lead Fitch to again cut Canada's bond rating after stripping the triple-A grade earlier this year, even as low federal bond yields suggest investors are still eager buyers.

The government will also extend a wage subsidy program through next summer, and compensate businesses if they must shut down again because of public health orders. People receiving so-called CERB relief checks will be transitioned to regular unemployment insurance funded by payroll taxes, which will be transformed to include more self-employed and gig workers who have been excluded.

The government's aim "is to build back better to create a stronger, more resilient Canada" the Throne Speech said.